The Republican-controlled House of Representatives passed a bill on Friday morning that would permanently extend the bonus depreciation tax break for businesses.
The measure, HR 4718, which was crafted by Representative Pat Tiberi (R-OH), was approved by a 258-to-160 vote. Thirty-four Democrats voted for the legislation, while two Republican lawmakers voted against it.
Representative Richard Neal (D-MA) pitched a proposal before the final vote to recommit with instructions to the House Ways and Means Committee, which would have required the bill to be reported back to the House with an amendment to extend bonus depreciation for two additional years instead of permanently. That proposal was struck down by a vote of 191 to 229.
Under HR 4718, businesses would be able to claim an additional first-year depreciation tax deduction equal to 50 percent of the value of qualified property investments, such as machinery and equipment. Tiberi said in May that permanently extending the tax break will help companies better access capital, invest in new facilities, and create jobs.
“This tax feature is popular with business and farms because it helps manage cash flow, minimize tax liabilities, and reduce the need to borrow from lenders,” Representative Richard Hanna (R-NY) said in a written statement on Friday. “Overall, bonus depreciation makes it easier and more affordable for businesses to make costly capital investments which are necessary to grow their operations and create new jobs.”
Additionally, the bill would allow taxpayers to claim a portion of unused alternative minimum tax (AMT) credits in lieu of bonus depreciation. The bonus depreciation and AMT provisions both expired on December 31, 2013.
The legislation, which according to an estimate from the Joint Committee on Taxation would add roughly $287.4 billion to the federal deficit over the next 10 years, was passed by the House Ways and Means Committee on May 29.
Randall Stephenson, chairman and CEO of AT&T Inc. and chairman of the Business Roundtable, said in a statement on Friday: “Today’s House vote is a positive step toward accelerating higher business investment and growth, which are needed to restore the productive capacity of the US economy and propel job creation. Fifty percent expensing reduces the cost of capital for business investment, thereby allowing business to undertake a greater amount of investment, so the Senate should act without delay.”
However, the bill is expected to stall in Congress as the Senate is unlikely to vote on any tax break legislation before the November midterm elections.
Even if the Senate were to pass the House’s proposal to permanently extend bonus depreciation, President Obama’s senior advisors would recommend that he veto the bill.
The White House criticized the legislation on Thursday, saying the bonus depreciation provision was enacted in 2009 to provide short-term stimulus to the economy, and it was never intended to be a permanent corporate tax cut. The Obama administration also said the bill includes no cost offsets, and the $287 billion price tag would wipe out more than one-third of the deficit reduction achieved by the American Taxpayer Relief Act of 2013.
“The deficit increase in HR 4718 is more than 20 times the cost of the proposed extension of emergency unemployment benefits, which Republicans are insisting be offset, and more than triple the discretionary funding increases for defense and nondefense priorities enacted in the Bipartisan Budget Act of 2013, which were offset,” the White House said. “House Republicans also are making clear their priorities by rushing to make business tax cuts permanent without offsets even as the House Republican budget resolution calls for raising taxes on 26 million working families and students by letting important improvements to the Earned Income Tax Credit, Child Tax Credit, and education tax credits expire.”
The Obama administration added that it wants to work with Congress to make progress on measures that strengthen the economy and help middle-class families, including pro-growth business tax reform.
“However, making costly business tax cuts permanent without offsets represents the wrong approach,” the White House said.